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The idea of

owning a first home gives many home buyers a strong dose

of sticker shock.

With a bottom line price of

six figures, many first-time home buyers ask,

"What's in it for me, besides a big down payment and

monthly mortgage bills that last for years?" The

answer is: tax breaks.

"Don't forget to

calculate tax savings when deciding whether to own or how

much you can afford," says Richard Roll, president

of American Homeowners Association.

"Uncle Sam has

designed several tax deductions to make home ownership a

little easier to manage financially. Just the mortgage

interest deduction alone can be substantial." For

more information, go to https://www.ahahome.com

Three major items are

deductible:

1 - Mortgage loan interest,

including any late fees.

2 - Purchase points, also

known as loan origination fees.

3 - Property taxes.

Here's what the numbers

mean to a hypothetical buyer of a $126,000 starter home.

The buyer makes a 5 percent down payment of $6,300, and

takes out a 30-year loan for the remaining $120,000 at

7.5 percent interest. Total mortgage interest payments

for the first year would be $8,957.

Property taxes, which vary

according to where you live, will surely add up to at

least several hundred dollars per year. And if you

qualify, you also could deduct the purchase points, if

any, from your first year's return. One point is equal to

1 percent of the purchase price, in this case $1,260.

These are substantial tax

deductions. Just the mortgage interest alone, nearly

$9,000, is a hefty tax break.

Remember that only the

above items are deductible. You cannot deduct your

homeowner insurance, or loan processing fees, or private

mortgage insurance.

Naturally, there are more

financial considerations to purchasing your first home

than just the tax issue. Home ownership involves a

long-term financial commitment, not only to a mortgage

loan but to insurance, maintenance and repair needs as

well. And your monthly mortgage payments may be higher

than rent you're paying now.

But with these deductions,

your annual tax bill may come down enough to help

compensate for your higher housing costs. Crunch the

numbers. Ideally, you want to reduce the tax withheld

from your paycheck and increase your cash flow.

As a renter, you might

enjoy filing your simple 1040-EZ, without having to fill

out a longer return with itemized deductions. But if you

qualify for these deductions, and they exceed the 1999

standard deduction of $7,200 for married couples filing

together and $4,300 for single filers, then it pays to

itemize, especially after factoring in charitable

contributions and other deductions available to

itemizers.

For more information on any

aspect of buying a home, go to https://www.ahahome.com,

the web site for American Homeowners Association.

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